Poor households have less access to formal insurance to protect themselves against risks such as the death of the family breadwinner, severe or chronic illness in the family, or the loss of an asset, including livestock and housing.

Microinsurance helps people manage unexpected events in return for payments proportional to the likelihood and level of a specific risk. Areas covered by microinsurance include health, assets, agriculture, and death. As with all insurance, risk pooling under microinsurance allows many individuals or groups to pool risks and redistribute the costs of the risky events within the pool.

As microfinance institutions expand beyond credit to a broader array of financial products, they are becoming more interested in offering clients microinsurance products in partnership with insurance companies. While commercial insurers provide the majority of the world’s products, mutual, cooperative, and other community-based or community-led insurance organizations are emerging as microinsurance providers. The greatest challenge for microinsurance schemes is finding the right balance between adequate protection and affordability to deliver real value to the insured.

A woman smiles next to her livestock. Photo by Probal Rashid, 2013 CGAP Photo Contest